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Connecticut has enacted legislation authorizing the Connecticut Department of Revenue Services to implement a “fresh start” tax amnesty program effective October 31, 2017 through November 30, 2018. The program allows for the waiver of most penalties as well as 50% of the interest related to a failure to pay any amount due to the commissioner by the date prescribed for payment. A fresh start agreement for a qualified taxpayer that has failed to file a tax return(s) may also provide for a limited look-back period.

A “qualified taxpayer” is a taxpayer that:

 

  • Failed to file a tax return, or failed to report the full amount of tax properly due on a previously filed tax return, that was due on or before December 31, 2016;
  • voluntarily comes forward prior to receiving a billing notice or a notice from the Department of Revenue Services that an audit is being conducted in relation to the tax type and taxable period or periods for which the taxpayer is seeking a fresh start agreement;
  • is not a party to a closing agreement with the Commissioner of Revenue Services in relation to the tax type and taxable period or periods for which the taxpayer is seeking a fresh start agreement;
  • has not made an offer of compromise that has been accepted by the commissioner in relation to the tax type and taxable period or periods for which the taxpayer is seeking a fresh start agreement;
  • has not protested a determination of an audit for the tax type and taxable period or periods for which the taxpayer is seeking a fresh start agreement;
  • is not a party to litigation against the commissioner in relation to the tax type and taxable period or periods for which the taxpayer is seeking a fresh start agreement; and
  • applies for a fresh start agreement in the form and manner prescribed by the commissioner.

 

Qualified taxpayers who participate in the amnesty program must:

 

  • Voluntarily and fully disclose on the application all material facts pertinent to the tax liability;
  • file any tax returns or documents that may be required by the commissioner;
  • pay in full the tax and interest as set forth in the fresh start agreement;
  • agree to timely file any required tax returns and pay any associated tax obligations to the state for a period of three years after the date the fresh start agreement is signed by the parties to such agreement; and
  • waive, for the taxable period or periods for which the commissioner has agreed to waive penalties and interest, all administrative and judicial rights of appeal that have not run or expired.

 

The waiver of penalties and interest will not apply if the commissioner finds that any of the following circumstances exist:

 

  • The taxpayer misrepresented any material fact in applying for or entering into the fresh start agreement;
  • the taxpayer fails to provide any information required for any taxable period covered by the fresh start agreement on or before the due date prescribed under the terms of the fresh start agreement;
  • the taxpayer fails to pay any tax, penalty or interest due in the time, form or manner prescribed under the terms of the fresh start agreement;
  • the tax reported by the taxpayer for any taxable period covered by the fresh start agreement, including any amount shown on an amended tax return, understates by ten per cent or more the tax due and the taxpayer cannot demonstrate to the satisfaction of the commissioner that a good faith effort was made to accurately compute the tax; or
  • the qualified taxpayer fails to timely file any required tax returns or pay any associated tax obligations to the state, during the three-year period after the date the fresh start agreement was signed by the parties to such agreement.

 

No payment made by a taxpayer for a taxable period covered by a fresh start agreement shall be refunded or credited to a taxable period other than the taxable period for which such payment was made. (S.B. 1502, Laws 2017)

(11/20/2017)

The Multistate Tax Commission (MTC) has announced a sales/use tax and income/franchise tax amnesty program for online sellers that will run from August 17 to November 1, 2017 (previously October 17, 2017). Qualified online sellers with potential tax liability may be able to use the MTC's voluntary disclosure agreement (VDA) to negotiate a settlement during the amnesty period if they meet certain eligibility requirements. Taxpayers that have not been contacted by any of the states participating in the amnesty program will be able to apply to start remitting sales tax on future sales without penalty or liability for unpaid, prior accumulated sales tax in the participating states. 25 MTC member states have agreed to participate in the amnesty program. The participating states include: 

 

  • Alabama
  • Arkansas
  • Colorado (sales/use tax only)
  • Connecticut
  • District of Columbia (may not waive all prior periods)
  • Florida
  • Idaho
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Massachusetts (special provisions apply)
  • Minnesota (special provisions apply)
  • Missouri
  • Nebraska (may not waive all prior periods)
  • New Jersey
  • North Carolina
  • Oklahoma
  • Rhode Island
  • South Dakota
  • Tennessee
  • Texas 
  • Utah
  • Vermont
  • Wisconsin (will require payment of back tax and interest for a lookback period commencing January 1, 2015 for sales/use tax, and including the prior tax years of 2015 and 2016 for income/franchise tax)

 

Some of the additional states may require a limited look-back period for prior tax liabilities. Sellers who wish to participate in the program will need to file the voluntary disclosure program paperwork during the program dates. The MTC will route the paperwork for each participating state for which the seller is seeking amnesty protection. For more details visit the MTC website.

 

UPDATE: The Multistate Tax Commission's online seller amnesty program is now over. If you didn't take advantage of this program but realize you need to evaluate your activities, you can contact us here.

(11/07/2017)

Effective October 1, 2017, any Connecticut sales tax permit issued on or after October 1, 2017 will expire two years from the anniversary date of when the permit was issued, unless the permit is renewed. Previously, Connecticut sales tax permits would expire after five years. (Ch. 36 (H.B. 7109), Laws 2017

(07/26/2017)

On June 12, 2017, Rep. Jim Sensenbrenner (R-WI) and House Judiciary Chairman Bob Goodlatte (R-VA) introduced the No Regulation Without Representation Act of 2017. A previous version of this bill had been introduced in 2016 and failed to pass. Under the proposed bill, a State may tax or regulate a person’s activity in interstate commerce only when such person is physically present in the State during the period in which the tax or regulation is imposed. Under the proposed bill, the physical presencerequirement would apply to sales and use taxand net income and other business activities taxes, as well as the states’ ability to regulateinterstate commerce. “Physical presence” in a state includes:

 

  • maintaining a commercial or legal domicile in the state;
  • owning, holding a leasehold interest in, or maintaining real property such as an office, retail store, warehouse, distribution center, manufacturing operation, or assembly facility in the state;
  • leasing or owning tangible personal property (other than computer software) of more than de minimis value in the state;
  • having one or more employees, agents or independent contractors present in the state who provide on-site design, installation, or repair services on behalf of the remote seller;
  • having one or more employees, exclusive agents or exclusive independent contractors present in the state who engage in activities that substantially assist the person to establish or maintain a market in the state; or
  • regularly employing in the state three or more employees for any purpose.

 

“Physical presence” in a state would not include:

 

  • entering into an agreement under which a person, for a commission or other consideration, directly or indirectly refers potential purchasers to a person outside the state, whether by an Internet-based link or platform, Internet Web site or otherwise;
  • any presence in a state for less than 15 days in a taxable year (or a greater number of days if provided by state law);
  • product placement, setup or other services offered in connection with delivery of products by an interstate or in-state carrier or other service provider;
  • Internet advertising services provided by in-state residents which are not exclusively directed towards, or do not solicit exclusively, in-state customers;
  • ownership by a person outside the state of an interest in a limited liability company or similar entity organized or with a physical presence in the state;
  • the furnishing of information to customers or affiliates in such state, or the coverage of events or other gathering of information in such state by such person, or his representative, which information is used or disseminated from a point outside the state; or
  • business activities directly relating to such person's potential or actual purchase of goods or services within the State if the final decision to purchase is made outside the state.

 

In addition, the bill prohibits the imposition or assessment of a sales, use or other similar tax or a reporting requirement unless the purchaser or seller has physical presence in the state.  This would prohibit all the remote seller legislation (click through, affiliate, economic, marketplace and reporting/notification). If enacted, the legislation would apply with respect to calendar quarters beginning on or after January 1, 2018. (No Regulation Without Representation Act of 2017)

(07/12/2017)

On April 27, 2017, a bipartisan group of senators introduced the Marketplace Fairness Act of 2017 (MFA). Similar legislation was introduced in both 2013 and 2015 and failed to be enacted both times. If enacted, the legislation would authorize states meeting certain requirements to require remote sellers that do not meet a "small seller exception" to collect their state and local sales and use taxes. The small seller exception is set again at $1 million of remote sales annually. The only other significant change from the 2015 version is a prohibition of making the effective date during the 4th quarter of the calendar year. For information on the previous versions of the bill, visit Senate Introduces Marketplace Fairness Act of 2015.  

 

On April 27, 2017, a bipartisan group of lawmakers introduced the Remote Transactions Parity Act (RTPA) of 2017. Similar legislation was introduced in 2015 but failed to be enacted. Like the MFA, the legislation would also create sales and use tax collection obligations for remote sellers, but has some differences and additional provisions. Some key differences from the Marketplace Fairness Act include a different definition of a small seller.  The RTPA has a phased in threshold starting at $10million in year one, then $5million, then $1million.  In year 4, there is no threshold.  In addition to the monetary thresholds, any seller that sells on an electronic marketplace is considered a small seller.  A difference from the 2015 version of the bill is an inclusion of a definition of remote seller which specifies when a company is NOT a remote seller which includes physical presences for more than 15 days in a state, leasing or owning real property and using an agent to establish or maintain the market in a state if the agent does not perform business services in the state for any other person during the taxable year.  For more information on the Remote Transaction Parity Act of 2015, visit House Introduces Remote Transactions Parity Act of 2015. (Marketplace Fairness Act of 2017, Remote Transactions Parity Act of 2017)

(05/04/2017)

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